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Japan-Update

Daikin's profit hits fresh high on overseas strength

Acquisitions, stronger sales network contribute to first-quarter record

Basic air conditioner models proved popular in India.

OSAKA -- Daikin Industries' net profit rose 4% on the year to 50.9 billion yen ($461 million) for the three months ended June 30, a fourth consecutive record high for the quarter, as aggressive expansion abroad continued to bear fruit.

The Japanese air conditioner maker's sales climbed 10% to 586.6 billion yen, while operating profit grew 5% to 74.4 billion yen, results released Tuesday show. Margins narrowed slightly, weighed down by higher prices for such materials as copper.

The air conditioning segment performed well in foreign markets, which now make up 80% of sales. Sales jumped 15% in the key regions of China and the Americas.

Daikin added dealers in the heavily populated northeastern U.S. and stepped up marketing to construction businesses, boosting sales of systems for commercial properties and housing complexes. In China, the Japanese company used its own construction and sales centers to move more units for high-end residential properties.

Foreign markets' contribution to Daikin's top line is growing as the company expands its overseas footprint. Japan's share of sales in the air conditioning segment has fallen from 36% to less than 20% over the last five years, even as the actual sales figure has remained roughly flat.

Meanwhile, the Americas account for nearly 30%, up from just 9% five years ago, thanks largely to the 2012 acquisition of U.S.-based Goodman Global Group. China's share sits close to 20%. The rest of Asia, where Daikin has been building new production facilities, contributes 13%.

This shift has created a profit structure that does not rely too heavily on any one region. Demand for residential air conditioners sagged in Thailand and Indonesia last quarter amid unfavorable weather. But efforts to cultivate sales networks in those markets paid off with growth in commercial units, which offer a steady stream of income even after installation as customers shell out for periodic inspections and maintenance.

The air conditioning segment's sales swelled 25% in India, thanks to an expanded dealer network as well as the popularity of cheaper household units with only cooling functions. Sales rose 3% in Asia and Oceania, excluding Japan and China.

Daikin maintained its forecast for the fiscal year ending March 2018. It sees sales growing 7% to 2.19 trillion yen and net profit rising 4% to 160 billion yen.

(Nikkei)

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